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American Economic Review: Vol. 101 No. 3 (May 2011)

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Quality Adjustment for Health Care Spending on Chronic Disease: Evidence from Diabetes Treatment, 1999-2009

Article Citation

Eggleston, Karen N., Nilay D. Shah, Steven A. Smith, Ernst R. Berndt, and Joseph P. Newhouse. 2011. "Quality Adjustment for Health Care Spending on Chronic Disease: Evidence from Diabetes Treatment, 1999-2009." American Economic Review, 101(3): 206-11.

DOI: 10.1257/aer.101.3.206

Abstract

Although US health care expenditures reached 17.6 percent of GDP in 2009, quality measurement in this important service sector remains limited. Studying quality changes associated with 11 years of health care for patients with diabetes, we find that the value of reduced mortality and avoided treatment spending, net of the increase in annual spending, was $9,094 for the average patient. These results suggest that the unit cost of diabetes treatment, adjusting for the value of health outcomes, has been roughly constant. Since input prices have not been declining, our results are consistent with productivity improvement in health care.

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Authors

Eggleston, Karen N. (Shorenstein Asia-Pacific Research Center, Stanford U)
Shah, Nilay D. (Mayo Clinic)
Smith, Steven A. (Mayo Clinic)
Berndt, Ernst R. (MIT)
Newhouse, Joseph P. (Harvard U)

JEL Classifications

H51: National Government Expenditures and Health
I12: Health Production
I18: Health: Government Policy; Regulation; Public Health


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